Why Mobile Payments Will Heat Up in 2017

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Street Fight’s 2017 Predictions round-up was heavy on voice search and AI, and pretty light on mobile technologies. I expect the former two to be critical hyperlocal technologies, but their payoff might take some time. Meanwhile, there’s reason to believe that mobile payments might finally gain momentum this year.

Why payments? Certainly there is plenty of interest in other emerging mobile tech:

  • But app love may be fading. It’s so hard for most brands or merchants to get their own app on a user’s homescreen, let alone achieve frequent usage. However, that means new life for mobile websites and pages.
  • While voice input is taking off, chatbots that depend on messaging apps may have a tougher time catching on in the U.S. or Europe, where messaging hasn’t achieved platform status. And menu commands are almost always a more precise means of transacting.
  • Even diehard mobile video fans think the 5G infrastructure that will disrupt TV distribution is two to three years away.

Mobile payments have been inhibited by point-of-sale hardware upgrade requirements and the lack of a killer pitch for either users or merchants. But the movement to chip-based credit and debit cards in the U.S. could help on the hardware front. And rather than a single reason for being, a combination of factors could drive mobile payment adoption. Mobile payments and digital wallets could play a role in mobile advertising, loyalty programs, and the overarching hyperlocal marketing challenge of online-to-offline attribution.

An awful lot of spending is going into mobile advertising, without much in the way of click-throughs and other conventional ROI metrics to show for it. BIA/Kelsey estimates that $12 billion was spent on locally-targeted mobile advertising in 2016, up from $10 billion the previous year. Yet big advertisers are mostly using real-time local data for customer insights, rather than targeting or customized offers, or else doing probabilistic modeling for their ROI attribution. But the best way to prove mobile advertising drove a customer to a physical store and made a purchase is through a credit card, a coupon, or an in-store sensor. Mobile payment technology is very friendly to all three. On the consumer side, mobile payments are good hubs for cross-merchant loyalty programs.

MobileInterestNewTechAs shown in the figure above, about a third of big brands and multi-location retailers who used mobile advertising last year are interested in exploring mobile wallets. Those data are from Street Fight’s 2016 survey of  big national-to-local marketers. Suppliers of technology and services that could help integrate mobile payments and mobile advertising should take note of some other characteristics of these mobile advertisers, including:

  • Corporate headquarters, rather than regional or branch offices, tends to control digital display advertising and mobile marketing budgets.
  • Mobile advertisers are relatively sophisticated in their use of advertising and marketing management and analysis tools, compared with other big brands and retailers. For example, more of them used digital dashboards, social media management tools, and data aggregators than did other survey respondents.
  • Over half of them rated direct mail as one of their most effective local marketing tactics. There might be some opportunities for coordinating mobile campaigns with email and snail mail.
  • Over two thirds of them said they were comfortable working with startups or smaller suppliers of marketing technologies and services.
  • Thirty percent said customer privacy or security concerns were difficult, though those were a little less of a pain-point than making various technologies work together, or overlapping or contradictory data analytics tools.

David Card is Street Fight’s director of research.